Production Machining

JUL 2013

Production Machining - Your access to the precision machining industrial buyer.

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The Best Indicator for Managing Your Shop By Miles Free, Director of Industry Research and Technology, PMPA :: What is the best indicator for measuring your shop's performance? Net proft before taxes is a quick, of-the-top-of-the-head MBA answer I would expect. Gross proft is what I would expect to hear from an experienced shop owner who knows there are a lot of things that can be done with those gross profts to reinvest in the shop prior to declaring "net profts." Te quick ratio tells us whether or not we will be selling our frst born for cash in order to operate. Sales this month tells us if we are meeting the plan. Tese are all fnancial indicators. Tey look at the company through the lens of fnance. All measures are denominated in dollars. Dollars are good. Tat's kind of why we are in business. And yet… Tere is more to business than dollars. Tere are more ways to look at our businesses than strictly fnancial. Here are three other lenses to use for analyzing our businesses. I could argue that if you do a good job with them, the fnancial results we all desire will come as a result. Customer: Let's face it, without customers, there would be no businesses. All of us learned in 2008-2009 that without demand, there are no sales. Customers are critical to the sustainability and success of our shops. We divide our authorities between operations and sales; sales is formally responsible for customers. But really, we all are. What indicators do you use to stay up to date on customer satisfaction? You have quality indicators for products shipped. Do you have indicators for quality of customer service? How do you measure the impact on your customers of your company's provision of products and services? What do you think that your customers wish that you knew? Learning and Growth: Tis is a great predictor of your ability to be competitive in the future. Wayne Gretsky had a famous quote about "skating to where the puck is going to be." Just because the skills of your people are adequate today does not mean that they will be sufcient to sustain your shop's success in the near future. How many parts are you producing today that have tolerances or GD&T callouts that you were not quoting 3 years ago? How did you get from then to now? Managers have been far too complacent about learning and growth for the last 30 years. Trained journeymen are not created spontaneously and dropped from the sky into our shops. Do you have a vigorous training program? Have you assigned mentors to all your operators? Do you have a cross-training and personnel-improvement plan? What percentage of your employees have documented training completed over the past year? If you don't upgrade the skills of your team, who exactly do you think will? Internal Business Processes: Tese are the means that our people employ to provide our customers with satisfying products and services. Our business processes include not only our equipment and gaging; they also include our procedures, tribal and institutionalized knowledge and the willingness of our people to execute. How do you measure your internal business processes? How do you know if they are capable? What was the last systemic problem that you made permanently go away in your internal systems? How many such "killed them dead," root-cause problems can you and your team chalk up on the scoreboard? I am always impressed when I meet a shop owner, and they have a great grasp on their fnancials. I never fail to learn from the shop managers that also manage by indicators other than fnancial. Tey know what the CONTINUES ON PAGE 20 18 PRODUCTION MACHINING :: JULY 2013

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